Question

"A European plastics manufacturer, is considering forming an alliance with a U.S. military goods manufacturer to develop a new type of polymer that can be used for international industrial and military applications. Such a partnership represents what type of direct investment?"

Answer 1

Joint venture

Step-by-step explanation:

Joint Venture can be defined as the coming together of two or more individual or firms to accomplish a specific purpose. The firms which come together to form a joint venture are called Co-venturers.

Co-venturers could be a privately owned firm, government owned or foreign firms as in the case of the European plastics manufacturer and the U.S military goods manufacturer.

Co-venturers come together to form a legally independent undertaking and to accomplish a project.

Features of a joint venture

1. Capital to finance the business is raised by the Co-venturers.

2. Co-venturers jointly control the business.

3. Profit/loss is shared among Co-venturers.

4. Decision is made jointly.

5. It is formed by the coming together of two or more firms.

Reasons for Joint Venture

1. For foreign participation of the business.

2. Joint venture enjoys economies of scale.

3. To acquire more resources for business operations.